iQuanti: Congratulations, you're about to be a parent! You're entering the planning stages for your newborn and making sure you'll be able to provide for them financially. You'll want to look over things like your budget, education savings plans, life insurance, and how each of these components fits in with the big financial picture and your financial plan.
1. Update your budget
The first step in financial preparation for a newborn is to make sure you and your partner are on the same page about key financial values and priorities such as:
- How much of your child's college education do you want to cover?
- Do you both plan to continue working or will one parent stay home?
- \What sorts of experiences do you want to have with your child while they're still young?
Things can change as you go, but the sooner you can align on your plans, the better.
2. Create time to be with your newborn
Nothing is more valuable than the time you can spend with your newborn to bond. If you have paid parental leave through work, that can give you some time, but if you feel like you need more, you can calculate how much income you would need to cover the time you spend on unpaid leave, and make that a savings goal. This way you can make as much time as you can to be with your newborn in addition to what parental leave provides.
3. Protect your income assets
When it comes to the assets that children depend on most, it's easy to think of physical assets like a house, car, or stroller. In reality, the asset children tend to depend on the most is their parents' income, which is an asset worth protecting with life insurance.
Working parents may want to take out a term policy, which provides a safety net often for several decades.
Stay-at-home parents may also consider life insurance policies that can cover things like childcare expenses.
Some parents also find it worthwhile to consider permanent life insurance as an option for themselves and/or their children. A financial advisor can help you review your options and determine what would be right for your family.
4. Start an education savings plan
Education is a major expense for most families, but the sooner you can get started saving, the better. You can start a 529 plan anytime and name your child as the beneficiary as soon as they have a social security number. Think about how you want to allocate savings: a 529 is a great place to start, and there are other methods of saving for college that you might want to use in addition to the 529 plan.
The bottom line
Financial planning for a newborn is all about preparation to provide the best life you can for your child. The needs of every child will be different, the values of every parent may be different, but the more you look at the big picture, the better you can prepare to make sure no matter what happens, your child will be taken care of.
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Original Source: 4 Ways to Financially Prepare for Your Newborn
